Houston-based rig operator Paragon Offshore’s reorganization plan to allow it to exit Chapter 11 bankruptcy came under fire from some of the firm’s lenders at a court hearing on Tuesday, according to Bloomberg.
The reorganization plan would have Paragon lower its debt from $2.6bn to $1.4bn and use its cash to pay two groups of favoured creditors while the current owners retain a controlling stake in the company.
But a lawyer for lenders opposed to the plan told the hearing in Wilmington, Delaware federal court that the plan is based on an over-optimistic expectation that Paragon can win new business in a depressed market already saturated with rigs.
The dissenting lenders fear Paragon will run out of cash within three years.
This confirmation hearing on Paragon’s reorganization plan will be held over five sessions, ending on June 30.
Paragon had filed for Chapter 11 in February after being in talks with creditors since December 2015.
Like many firms in the offshore oil and gas industry Paragon was hammered by the plunge in oil prices which saw clients cut way back on drilling projects.
